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Online shipping costs expected to increase further into the pandemic

An Amazon working man delivers packages amid the coronavirus disease (COVID-19) outbreak in Denver, Colorado, April 22, 2020.

Kevin Mohatt | Reuters

Utterance costs have been rising across the country and are expected to continue as the pandemic drags on, creating a serious headwind for retailers, corresponding to a report by Jefferies.

“The recent growth in shipping costs has been fueled by the surge in e-commerce penetration, which has contrived a significant supply/demand imbalance and left carriers capacity constrained,” Jeffries’ analyst Janine Stichter bid in the report, which was based on a call with Dean Maciuba, a former FedEx executive who is currently the North America look after partner at consulting firm Last Mile Experts.

Consumers expect fast and free shipping, but that is an increasing saddle with for many retailers, especially those that were hurt by extended shutdowns during the Covid-19 pandemic. Mid-sized retailers are uniquely at risk because many don’t have the capacity to implement a robust and efficient enough shipping strategy to keep up with the required for fast deliveries.

This pressure comes largely from companies like Amazon, famous for its Prime two-day dispatching, one-day and same-day delivery options. This has made consumers expect fast and free shipping, even yet some may not even want or need it, said Stichter.

Online shopping during the holiday season last year did not hit as grave of peak as expected, according to Maciuba. He suspects that shipping carriers are looking to make up for financial losses since they ordained in building up infrastructure in preparation for increased demand that never materialized. On the other hand, retailers could advantage from lower-than-expected shipping costs.

However, holiday surcharges that shipping carriers like FedEx and UPS implemented to get up for the influx of orders aren’t going away. These surcharges will likely become the new normal moving front, in addition to the 5%-6% annual increases that are usually seen, Maciuba predicted.

FedEx recently announced new peak surcharges on Force out and domestic residential ground shipments for those customers who had a weekly volume of more than 30,000 packages. The 30-cents per case surcharge went into effect on Monday.

Maciuba told Jefferies that the best solution for shipping shippers to combat losses from the pandemic and holiday is to adopt alternative delivery methods like buy online, pick up in retailer services, curbside pickup and the use of third-party delivery apps like Doordash or Shipt.

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